The main sources for power generation in Bosnia and Herzegovina are domestic coals, mainly lignite and brown coals, which are relatively characterized with a high content of sulphur (3-5%) and incombustibles (˜30%). From the 70’s, use of this type of fuels was not allowed in the city of Sarajevo due to very unfavorable emissions to the atmosphere, during the heating period, and since then Sarajevo has been supplied with natural gas. All the heating installations in the city were reconstructed and adapted. The district heating system Toplane Sarajevo is supplied with electrical energy from the Public electrical distribution network (Elektrodistribucija Sarajevo) at low voltage (0.4 kV). The boiler-house Dobrinja III-2 (KDIII-2), from the district heating system of Sarajevo Suburb Dobrinja, which was not in use after the war 1992-1995, had a lot of advantages for the reconstruction into the co-generation plant. The Government of Canton Sarajevo financially supported this proposal. An analysis of co-generations for the district heating system and a selection of most appropriate co-generation systems were made. In the proposed conceptual design, the co-generation KDIII-2 was located in the existing boiler-house KDIII-2, connected with the heating system in Dobrinja. The operating costs of production of electricity and heat were evaluated in the study and compared with the costs of conventional energy supply to the district heating system. This analysis resulted in economic indicators, which showed that this investment was economically viable, and it also determined the payback period of the investment. In this paper results of the mentioned study and an overview of co-generation in Bosnia and Herzegovina are presented.